August 21, 2006 4:00 AM PDT

How to succeed in the gadget biz

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"Companies no longer have a little lab where they invent things themselves and come out into the market and the world and expect it to be a big success. In fact, a lot of the big breakthroughs you see are coming out of companies collaborating together," Bailey said.

The Sony Ericsson partnership, he said, is a good example of a hardware and content-provider union that has reaped benefits for both: inventive design and increased sales figures.

So far this year, Sony Ericsson has released three Walkman-branded music phones, and a Cybershot-branded 3.2-megapixel camera phone. The results are in, and they're pretty good: The partnership reported second-quarter sales of $2.89 billion, a 41 percent increase over the same quarter of last year.

"It's a good example of collaboration. Probably neither Sony or Ericsson could have done (alone) what they did together," Bailey said.

Others are following with similar partnerships. In June, Nokia and Siemens announced a new partnership created to compete with the success of Sony Ericsson.

Getting to know your customer base is "crucial," according to Mendelson. Service providers know their customers because they are in regular contact with them, while device manufacturers tend to stay focused on the physical product and improving the technology.

Barbara Bund, author of "The Outside-In Corporation," preaches the importance of customer-focused business models. "There are not a lot of companies who do a really good job of thinking through the customer perspective. It's very strange. It sounds so simple, but it's hard to do," Bund said.

The personal touch
Bang & Olufsen embraces this customer-as-king premise. Zean Nielsen, the Danish company's North American marketing director, explains it this way: "We don't see ourselves as a consumer electronics brand," but rather "a lifestyle company that happens to sell audio/video."

Sounds schmaltzy, but there's something to it. Nielsen said the company's customer relationship management software system lets him know, in real time, how many people have entered a store, who sees their advertising, and how much they're willing to spend on a home theater system, which is usually around $100,000.

"It's difficult to find those types of people. Once you have them, you want to hold on to them for a long time," he said. "We have every single customer record we could get our hands on."

If need be, said Nielsen, a salesperson will teach the customer's entire household how to operate the new home theater system. And after five days, the CRM system prompts the salesperson to handwrite a thank you card. Then, 21 days later, it reminds the store's manager to send a thank you card with a gift.

"We don't have the same budget as the Sonys and Samsungs of the world...We have to be very, very targeted as far as who we advertise towards," Nielsen said.

Of course, not every company can duplicate the inventiveness of Apple or throw wine parties for customers. Smart companies will try, at least in their own way. But it remains to be seen which will succeed.

"Is it going to be a current industry incumbent?" asked Bailey. "Or is it going to be a new entrant, somebody who comes in laterally from a different direction, focused on the consumer and just pulls everybody who makes devices along with them? That's the real question."

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18 comments

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Funniest line in the article:
"...and it gives customers what they want, from the packaging to
the slick advertising,..."
<sarcasm>Sure, I buy Apple products because of the packaging
and the advertising! </sarcasm>

Give me a break. It's quality that matters. If you buy a Macintosh
or an iPod, you can expect it to work well out of the box, with
little or no effort on your part. Apple really doesn't have any true
competition on a quality level. A Windows PC? You better have IT
standing by, and be sure to install anti virus software BEFORE
connecting to the internet. Some other MP3 player? Good luck
figuring out how and where you'll download songs.

What most electronics companies don't get is that ease of use is
far more than just point and click. It's point and click with as few
clicks as possible getting you the results you're after. It's little
details throughout the system that just work, and in a way that
make you think it's only natural. Here's just one example: In
Apple's email program, the inbox shows when messages arrived
and the format depends on the width you set. If you provide
enough room, a message recieved will read something like this:
August 19, 2006 8:38 PM
Narrow the column and instead of truncating, it progressively
changes the format:
Aug 19, 2006 8:38 PM
8/19/06 8:38 PM
Aug 19, 2006
8/19/06

This is just one tiny little example of the attention to detail that
is found throughout Apple products and which most other
electronics companies just don't provide. That detail IS the wow
factor!

If you want to convince people to buy a new product at a
premium over an old product, you've got to have a new product
that's better than the old one, and you can only do that by
paying attention to details. No amount of marketing will help
until you've got that right. Just look at Sony. They spend tons on
marketing. While it gets them sales, it reduces their profit
margin.
Posted by Macsaresafer (802 comments )
Reply Link Flag
lighten up
It's just an article
Posted by mammalthedog (10 comments )
Link Flag
Compared To Sony?
Just about any company looks good, when compared to the very stagnant Sony.

Apple's sole market share success is the iPod, and that will be facing increasing competition in 2007.

As for personal computers, my HP has Just Worked perfectly since I bought it in 2002 - never a hardware problem, never a successful virus/worm attack, never a need to reinstall Windows - 100% hassle free.
Posted by john55440 (1020 comments )
Reply Link Flag
Another Windows apologist!
So you've never had your Windows system compromised!
Congratulations  but how do you know? Most spam comes from
zombie PCs, and there's an awful lot of spam out there. What
makes you think yours isn't one of the spam bots?
Posted by Macsaresafer (802 comments )
Link Flag
Info on packing also helps in comparison
You can see a DVD player from Toshiba, Sony, Philips on the same shelf with same price. How do you choose one finally? The Packing needs to give enough information about the product and its PLUSes against competition. I see that even the packing is so dull in some of these products. Ultimately people are brandconscious or take advice from some one who already has the product.

Bottom line, more precise information on packing, the better.
Posted by bhawar (3 comments )
Reply Link Flag
Technology should be indistiguishable from Magic
I don't know who said it first but it's the idea that's stuck in the back of my head when developing for users. Let me repeat that:

Technology should be indistinguishable from Magic

You plug the iPod in, buy your music through a seporate and easy to use program and tada.. it just works when you hit play. Regular users don't care how it works, they just want to hit Play and hear sounds. Resize columns in osX and the column format adjusts for best fit; magic.

Apple isn't the only company to figure this out but they do a heck of a job at it.
Posted by jabbotts (492 comments )
Reply Link Flag
Sony vs Apple
Irregardless of what many say, Apple simply don't innovate most of the time. What they do is borrow and improve, much the same as Microsoft.

They borrowed the GUI and the mouse. Compaq were first to develop HD music players, all Apple did was "improve" it. (Personally I don't like the iPod interface.) I am not sure what part of the original iPod that they did make or design, but it is not the dial, the HD, the main chip or even iTunes. These days all that makes Apple different from Dell is that they have their "own" software, but most of that is either bought or borrowed. Even the dock is a rip off of the RISC OS interface. The most original innovative thing that Apple has done for years was the Newton.

While it is not directly Apple anyway, Pixar is often added to Apples innovation list. But Pixar is largely made up of an arm of ILM that George Lucas (stupidly) sold off.

Sony on the other hand not only design, but they also make most of their products. Sony was the first to sell a portable tape player, and the first to sell a compressed audio player. Apple were just lucky that Toshiba had just released the 1.8 inch drives. Sony had the hard job of being forced to not only make their own compressed audio format (ATRAC), but also a storage method.

In addition, Apple have turned to Sony at least twice for help with the 3 1/2 inch drives and when they redesigned the Macintosh Portable into the less clunky PowerBook.

Innovation is not the number one way to succeed anyway. If that was the case then the Amiga and the early MP3 players would have been more successful. The key to success is making your target market think that they need your produce, whether they do or not. Apple excels at this.
Posted by Andrew J Glina (1673 comments )
Reply Link Flag
1) make a product people want
2) sell it for a reasonable price
3) make lots of money

In Sony's case they haven't come up with a creative product line since the walkman (remember the popularity of the yellow waterproof walkman when nobody even needed one?). Everything since they've been coasting on their brand image and now it's been eroded to has-been status.

case in point -the new Samsung LED tvs -i was floored by the quality using a blu-ray player hooked up to one of these. I thought 'this must be the product that's bringing sony back!' then I saw the brand name. sony's got a 10" OLED I can't buy, Samsung's got a 55" LED TV now on sale at Fry's. Guess which one I'm saving up my money for.
Posted by megustansalchichas (153 comments )
Reply Link Flag
 

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